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Monitoring and incentives of executives in risky firms: a test of the association with firm performance

Hutchinson, Marion R. (2003) Monitoring and incentives of executives in risky firms: a test of the association with firm performance. Research in International Business and Finance. Special Issue. Social responsibility: Corporate governance issues, 17(1), pp. 253-272.

Abstract

This study investigates the relationship between a firm’s risk and the effectiveness of the firm’s corporate governance practices. Previous research investigating the relationship between corporate controls and firm performance has been mixed and often weak. Therefore, this study sets out to determine the efficiency of monitoring and incentive contracts given certain characteristics of the firm. That is, the study sets out to determine whether risk firms with higher monitoring and levels of incentives are associated with higher firm performance.

The results of this study of 282 firms demonstrate how the relationship between firm risk and performance is associated with the monitoring and incentive contracts used by these firms. In particular, the results of this study showed that the negative association between risk and firm performance is weakened when firms have stronger monitoring and incentive mechanisms. The particular contribution of this study is to show that the role of corporate governance variables in firm performance should be evaluated in the context of the firm’s risk.

Impact and interest:

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ID Code: 13323
Item Type: Journal Article
Additional Information: For more information, please refer to the journal's website (see hypertext link) or contact the author.
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Keywords: governance, monitoring and incentives, risk, firm performance
ISSN: 0275-5319
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Copyright Owner: Copyright 2003 Elsevier
Deposited On: 16 Apr 2008
Last Modified: 29 Feb 2012 23:56

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